Managing loan repayments

What to do if you’re struggling to afford your loan repayments

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There’s no need to panic if financial difficulties mean you’re struggling to meet debt repayments. Help is available – here’s how to find it

Overhead shot of couple working on finances

A lot of people are facing financial difficulties in the wake of the Covid-19 pandemic.

At MoneySuperMarket, we know a change to your financial situation can be even more stressful if you have debts to pay off.

But even if you can’t afford your loan repayments, there’s always help to find a way out of debt – and the earlier you seek help the better. Find out how to take positive action with our guide.

What should I do if I can't afford my loan payments?

Sudden changes such as losing your job or going through a family crisis can leave you unable to meet your financial obligations. But whatever the reason you’re facing financial difficulties, there are things you can do to manage your debts:

  • Contact the lender: One of the first things you should do if you think you might struggle with loan repayments is contact your provider, as they usually take a more positive view of a borrower who gets in touch before starting to miss payments. But even if you’re already behind on your payments, making contact now can mean fewer charges and less stress – and your bank may be able to offer their own advice. They may also offer the option of taking a repayment holiday, reduced payments or a deferred payment loan
  • Seek free debt advice. If you’re unable to come to an arrangement with your loan providers, a debt adviser can help you negotiate an affordable monthly payment that is divided between your creditors

I’m worried about meeting my loan repayments – what can I do?

If you know your loan repayments are likely to become unmanageable in the future, you should try to seek out free debt advice.

What happens if I miss a loan repayment?

When you miss a loan repayment date, you’ll usually get a letter from the loan provider warning you the payment needs to be made – and informing you of any late payment fees or interest charges you will incur. The missed payment will also be noted on your credit report, which could make it harder to take out a loan or credit card in the future.

If you miss several loan repayments, you’ll get a default notice and may face the following if you don’t take any action:

  • The lender threatening to repossess your home or vehicle if it’s a secured loan
  • The debt being passed to a debt collection agency
  • Court action against you
  • A much larger negative mark on your credit report
  • Having to file for bankruptcy or agree to an IVA

That’s why it’s important to contact the lenders concerned and/or seek free debt advice as soon as possible if you can’t afford your loan repayments.

How to work out a budget

Drawing up – and sticking to – a budget is a great way to get your finances back on track when you’re in financial difficulty. It will also help you work out how much you can afford to pay towards loan repayments each month without running up more debts.

To create a household budget you should:

  1. Calculate how much is coming in each month, include salaries, benefits, and any other sources of income
  2. List your outgoings, everything from your mortgage or rent to your grocery shopping
  3. Work out where you can cut back, for example on non-essential spending such as eating out

How to seek free debt advice

Several organisations offer free advice for people struggling with debt. These include:

You can also get face-to-face debt advice from local charities and not-for-profit agencies. Your local council should have details of suitable organisations, or you can use the Money Advice Service’s debt advice locator to find help in your area. Just remember to check it’s free before you start.

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